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Why Choose ADGM SPVs: ADGM Special Purpose Vehicles

March 14, 2021by Mohammed Rahali

Choosing An SPV (Special Purpose Vehicle): All You Need To Know

IN BRIEF

In a world of highly intensified and complex  cross border transactions,  intrusive transparency & optimisted competitive profitability , it is paramount in a regulatory and a liability perspective to minimize systemic risks, to segregate assets, mitigate taxation exposure, improve confidentiality and enhance holding structure to adapt to 3.0 industrial revolution. ADGM SPV is a Key flexible vehicle to reach such targets in a reliable & robust legal framework.

WHY CHOOSE ADGM SPV?

In an increasingly regulated, higher risk exposure and amplified cross border transactions environment it is paramount to segregate financial and legal risk by ring-fencing assets and liabilities attached to related transactions without jeopardizing the integrity of the whole transactions or assets held for corporate or private purpose. In this instance, SPV could be used to serve to fulfil narrow, specific or temporary corporate or private family objectives such as subsidiaries, project or joint venture vehicles, financing, risk sharing, raising capital, IP rights structuring, holding companies, real estate sheltering structures.

A non-substantiated vehicle (SPV, special purpose vehicle), which is a free zone company, to conduct “Exempt activities” pursuant to the ADGM Special Company Regulations such as:

  • Acquisition, holding or disposal of any asset;
  • Securitizing assets, Investing in UAE real estate property;
  • Issuing investments;
  • Redeeming or terminating or repurchasing, whether with a view to re-issue or to cancel, an issue in whole or in part, of investments;
  • Entering into transactions or terminating transactions involving investments in connection with the issue, redemption, termination or re-purchase of investment.

ADGM SPV is the key vehicle to fulfill the challenging planning targets of the 3:0 industrial revolution”

 

WHY THE ADGM AS INTERNATIONAL FINANCIAL CENTER FOR SPVS?

  • TOP TIER FINANCIAL CENTER with numerous international Memorandums of Understanding in place facilitating international recognition
  • Part of OECD & EU WHITE LISTS of tax cooperative Jurisdictions – Not only any black list
  • COMMON LAW JURISDICTION: Common law of England and Wales on civil and commercial matters directly applicable which provides high level of legal certainty and reliability. ADGM SPVs are subject to the ADGM Companies Regulations 2015
  • INDEPENDENT ADGM COURTS
  • BEST-IN-CLASS RISK BASED INDEPENDENT REGULATORY FRAMEWORK
  • ADGM’s THREE INDEPENDENT AUTHORITIES (Registration Authority, Financial Services Regulatory Authority and ADGM Courts) provide a consistent, reliable and stable legal environment enabling registered companies to conduct business in confidence
  • ACCESS TO BROAD UAE DOUBLE TAX TREATY NETWORK (Subject to meeting requirements as set out by Ministry of Finance to obtain tax domicile certificate)
  • NO ATTESTATION REQUIRED FOR CORPORATE DOCUMENTS
  • SPVs are granted a commercial licence mentioning that the company is conducting Special Purpose Vehicle activities
  • Use of standard form of transactional documentation for increased efficiency
  • TAX BENEFITS:
    • 0% direct Tax
    • 0% Withholding Tax
    • No restriction on repatriation of capital
    • No foreign exchange controls
    • Access to UAE network of double tax treaties

WHAT ARE THE KEY USES & ADVANTAGES OF AN ADGM SPV?

  • SPVs are corporate vehicles, typically private companies limited by shares, incorporated to segregate financial and legal risk by ring-fencing assets and liabilities to avoid systemic risk within a Group of Companies – claims made by the SPV’s creditors cannot be attached to the assets of the SPV’s shareholders or any of its sister companies – and ensure that only assets attached to a related transaction are exposed to the associated liabilities.
  • SPV serve to fulfil narrow, specific or temporary corporate objectives such as subsidiaries, project or joint venture vehicles, holding companies.
  • SPV’s cost-effective, straightforward set up process, due diligence procedure & reporting requirements. However, a more limited public disclosure requirement can be met by the use of a ‘Restricted Scope Company’ SPV.
  • SPV can use the registered address of an ADGM registered agent, its ADGM parent company’s address.

A Foreign company can re-domicile/ migrate to ADGM pursuant to section 102 (application to Registrar for continuance within ADGM for the issuance of a certificate confirming that it continues as a company registered pursuant to ADGM Companies Regulations) in appliance with main jurisdictions ‘legislations such as BVI, Cayman Islands, Jersey and Guernsey.

 

WHAT ARE THE TYPICAL USES FOR ADGM SPVs?

TYPE USES
SECURITISATION Can be used by an originating party to securitise

loans (or other receivables) by creating an SPV which purchases these assets by issuing debt, secured on these underlying assets. This ensures that the holders of the asset-backed securities have first priority right to receive payments on the debt while limiting recourse to the originator of the assets.

REAL ESTATE INVESTMENT Can be used to acquire title to real property and limit recourse of mortgage lenders depending on the location of the asset. In some jurisdictions the sale of the SPV’s shares can result in lower taxes and transaction fees when compared to transferring the asset.
FINANCING Can be used to ring-fence investments, permitting financing without increasing debt levels for the parent company or exposing the parent’s assets (or SPV’s assets) to cross-liabilities.
ASSET TRANSFER Can be used to transfer assets along with associated material agreements which may permit the transfer of all or part of ownership of the enterprise while keeping intact material agreements which may be necessary to maintain the value of the asset.
RISK SHARING Can be used to form project companies for joint ventures, reflecting agreed management responsibility while legally isolating joint venture partners from risks associated with the venture.
RAISING CAPITAL Can be used to raise capital at favorable rates in certain situations, with credit worthiness determined by the available collateral of the SPV, rather than the credit rating of the parent company.
INTELLECTUAL PROPERTY Can be used to separate valuable IP into a standalone SPV which has minimal liabilities and can be used to raise funds and enter into license agreements with third parties. Also, a useful tool to manage products with a variety of IP components.
Passive Holding Structuring using ADGM SPV
Passive Holding Structuring using ADGM SPV (ADGM Special Purpose Vehicle)

 

Financing – Asset Ring Fencing Structuring: Using ADGM SPV
Financing – Asset Ring Fencing Structuring: Using ADGM SPV (ADGM Special Purpose Vehicle)

 

Securitisation Structuring: Using ADGM SPV
Securitisation Structuring: Using ADGM SPV (ADGM Special Purpose Vehicle)

Find out how we can help you with setting up an ADGM SPV?

If you wish to discuss the many benefits of ADGM SPVs, or any other legal entity, feel free to contact us.

For Support and assistance on setting up an ADGM SPV Get in Touch with our Corporate Team Today on +971 4 221 2602 or contact@wincoreadvisory.com.

Wincore specializes in Tax, Corporate and Fiduciary matters. We provide pragmatic, flexible and efficient solutions to individual entrepreneurs, startup businesses, foreign and local SMEs, multinationals, wealthy international families, HNWIs and UHNWIs.

Wincore Advisory Group’s full range of services on : CRS (AEOI) – OECD exchange of information ; Economic Substance Regulations; Trust & Foundation; Asset protectionEstate & Tax Planning; Corporate Services; Sophisticated UAE Sponsorship PlanningDebt Collection Services in UAE; Residency & Citizenship Services ( Foreign second passports).

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Mohammed Rahali

Managing Partner | E: m.rahali@wincoreadvisory.com | M: +971 (0) 55 138 9591

*Wincore Advisory Group DMCC is not providing any Legal and Financial Services.

© 2020 Wincore Advisory Group – Tax | Corporate | Fiduciary | Residency 

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